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New Sales Tax Rules Are Harming Small Businesses

The US Supreme Court ruling in the South Dakota v Wayfair, Inc. is now more than one year old. This landmark decision overturned more than 50 years of case law governing how and when retailers are required to collect sales taxes.

In the past year, more than 30 States, including Colorado, have modified their rules governing the assessment and collection of sales tax, creating more than 9,000 separate sales tax jurisdictions. Many of these jurisdictions have different rules on taxing products, services and cloud-based software apps.

This patchwork of taxation is creating chaos for any small business attempting to utilize the internet to grow their business and expand markets. Many are having to abandon such expansion plans, leaving the marketplace wide open for the big retailers, such as Amazon, Etsy, Overstock and Wayfair.

We believe Congress needs to act, and ask you to join us in demanding action NOW!

So What Happened?


Prior to the Wayfair decision, the responsibility of a retailer to assess, report and pay sales taxes was largely dependent on maintaining a Physical Presence in a jurisdiction. Physical presence might include having a store, a warehouse or employees located within a jurisdiction. That all made perfect sense for the past 50 years, and it's why a retailer in Colorado, for example, didn't have to charge sales tax for goods shipped to a customer in Texas.

What Does This Mean to Retail Businesses?


If your business has a website and engages in internet based out-of-state sales, you could be exposed to new laws passed by more than 30 states requiring you to register, collect, and pay sales tax in that state.

If you've assumed these new rules do not apply to you, you could be making a costly assumption! Most states have passed laws stating that if you sell more than $100,000 of products or services OR more than 200 transactions of any dollar amount, you are subject to their sales tax rules. Failure to follow their rules could damage your company in a few years with back taxes, penalties and interest.

When we prepare your annual income tax returns, we do not monitor sales volumes or the number of transactions by state and do not register or file sales tax returns for you . If you have a website selling products or services, or you offer sales across state lines, it is imperative you familiarize yourself with these rules and protect your company using the link below. We can make suggestions for software solutions if you wish, but it is not a component of our income tax preparation services.

New Remote Sales Tax Rules By State
 
We also strongly recommend that you contact your elected Federal officials and alert them to the need for a small business exemption with a threshold of $10 million in sales. Both parties in Congress have proposed legislation in this regard, but neither is gaining bipartisan support. Here is a link to find and contact your local House or Senate representative in Congress:

Find Your Federal Elected Official
 
Otherwise the costs of compliance could overshadow the revenues you generate from out of state sales.

With more than 9,000 separate state and local taxing jurisdictions in the United States, we feel compelled to alert you to the problem. Please join us today in demanding a solution from Congress, and allow small businesses to compete and thrive in the marketplace, both physical and virtual.


Contact Us

Loveland

(970) 667-1070
762 W Eisenhower Blvd
Loveland, Colorado 80537

Estes Park

(970) 667-1070
1212 Graves Avenue
Estes Park, Colorado 80517

Katy

(281) 665-7973
21398 Provincial Blvd
Katy, Texas 77450

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